Sheldon suggested the other day that Microsoft Corp. (NASDAQ: MSFT) should split off its web search and services arm so that it could fit better with a possible Yahoo, Inc. (NASDAQ: YHOO) combination. Instead of entertaining that notion, Microsoft still has some cash to spend to ensure, for now at least, it still has a growing presence in the web search and e-commerce arena.
To that end, the company announced this morning that it will spend $486 million to purchaseGreenfield Online, Inc. (NASDAQ: SRVY) as it swiped an earlier takeover offer from the Quadrangle Group with its $15.50 per share offer. Microsoft's offer of $17.50 per share is a 10% premium over Greenfield's closing price this past Monday, when the offer was received without Greenfield knowing the origin. That is, until today.
Microsoft wants control of www.ciao.com, one of Europe's leading price comparison shopping search engines. Does Microsoft really think owning a leading consumer review and price shopping search engine will bolster its Microsoft Live platform? Since it couldn't compete in the U.S. against Google, Inc. (NASDAQ: GOOG), perhaps Microsoft is turning to international purchases as a second competitive act. Greenfield also has an "internet survey solutions" division that Microsoft will sell to an undisclosed buyer.
Sprint Nextel Corp. (NYSE: S) seems to be on the mend from a perception standpoint. CEO Dan Hesse is still running television advertisements with his direct email address and a personal message to potential Sprint subscribers. The cellular carrier has a refined, electric image and has a decent competitor to Apple, Inc.'s (NASDAQ: AAPL) iPhone. Is it still in bad financial shape? That answer would be yes, as it continues to lose customers every single quarter.
While a Sprint/T-Mobile partnership was rumored this summer, the technology used between the two companies is incompatible. From a layman's perspective, it's precisely the problem that doomed the Sprint acquisition of Nextel. To this day, the brands still operate independently in many ways. That's been a death knell for the company, while larger competitor AT&T, Inc. (NYSE: T) perfectly merged its network with the now-gone Cingular over a few years. Still, would T-Mobile really want to team up with Sprint? Only if Sprint jettisons the Nextel brand and network sometime in 2008.
Analyst Christopher Larsen with Credit Suisse makes a decent argument for Sprint and Nextel parting ways as soon as possible, citing the recent $3 billion fund raiser Sprint announced. Could an impending corporate divorce be in the works? Sprint has already written off tens of billions in the bungled Nextel merger, but it could raise over $7.5 billion by selling Nextel.
Still, with the third- and fourth-largest wireless players (Sprint and T-Mobile, respectively) ripe for consolidation, combining two very different networks better work if there's even a hint of a future combination between the two. But right now, that may be the only choice: Verizon Wireless and AT&T are kicking butt in the wireless market in the U.S.
U.S. stock futures were lower this morning on fear Tropical Storm Gustav's path may pose a threat to refinery activity along the Gulf of Mexico coastline and some would have to shut down. Indeed, oil prices rose to above $117 a barrel Wednesday. Also in focus today is the upcoming durable goods order to be reported before the opening bell. Meanwhile, the FDIC is considering borrowing funds from the Treasury, amid an expected wave of bank failures. Nine banks have failed so far this year, and the number of troubled U.S. banks rose 30% to 117 in the second quarter. [Update: Futures turned positive after durable goods unexpectedly gained.]
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), which stocks jumped big Tuesday, both had several ratings cut by Standard & Poor's. Still, both stocks seem to continue their climb in premarket with Fannie shares up 7.5% and Freddie's up 10%. At least two analysts, from Citigroup and Goldman said Tuesday the situation isn't as bad as it may seem.
From financials to toys: A federal jury awarded Mattel Inc. (NYSE: MAT) $100 million in damages on Tuesday in a federal copyright lawsuit against MGA Entertainment Inc., the maker of the saucy Bratz dolls.
Moving to pharmaceuticals, Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) and Eli Lilly & Co. (NYSE: LLY) shares are down 10% and 1% respectively in premarket trading after four more patients taking their Byetta diabetes medication have died. Baird downgraded Amylin from Buy to Neutral and cut its price target from $37 to $27. Soleil downgraded AMLN from Hold to Sell.
Shares of Take-Two Interactive (NASDAQ: TTWO) are up about 3% today after the company disclosed that it has entered into a confidentiality agreement with Electronic Arts (NASDAQ: ERTS), in a sign that a deal may get done after all. Last week, Electronic Arts let its tender offer expire but said that it would listen to a confidential presentation on the company's operations.
In an 8-K filed with the SEC yesterday, Electronic Arts disclosed the confidentiality agreement and added that its terms prohibit the company from commenting publicly on the negotiations until a deal is reached or discussions are terminated.
It's hard to know what to make of this. By getting Electronic Arts to sign a confidentiality agreement, Take-Two has put an end to the tit-for-tat soap opera aspect of this takeover battle. Whether they're serious about getting a deal done remains to be seen. Given Take-Two's track record of filibustering and questionable governance, I'm skeptical. At this point, investors should be evaluating shares of Take-Two Interactive based on its prospects as a stand-alone business, not the chances of a deal that Take-Two's board has demonstrated a lack of enthusiasm about.
Temasek Holdings is one of Singapore's sovereign wealth funds (SWFs), managing $130 billion. Over the past few years, the fund has been diversifying into emerging markets as well as developed economies.
In fact, Temasek was one of the early investors in some major U.S. financial institutions. It has invested $5 billion in Merrill Lynch (NYSE: MER) back in December.
While Temasek hasn't tracked well, SWFs focus on the long term. Temasek still appears to be bullish on U.S. financial services companies as the portfolio concentration is a whopping 40%. And there are even rumors that Temasek may invest in Lehman Brothers (NYSE: LEH).
According to its annual report, Tamasek reported a $12.8 billion net profit for the past year as of the end of March. Keep in mind that the fund has engaged in a variety of asset sales.
Going forward, Tamasek is glum on its forecast, though. Basically, the fund thinks that the credit crunch will last another two years – which is certainly depressing.
In India, the growth of the information technology (IT) industry has been stunning. For the most part, the strategy has been to focus on internal growth. However, this may be changing; that is, expect more M&A.
In a way, the Indian IT service providers are victims of their own success. For example, wages are skyrocketing and it's getting tougher to find quality consultants.
With the Axon deal, Infosys will add about 2,000 consultants who specialize in the complex work of SAP (NYSE: SAP) implementations -- projects that can certainly generate juicy fees. Infosys will also get a stronger platform in Europe. Last year, Axon generated $378.3 million in revenues, with $37.4 million in profits.
According to Murray Beach, managing Managing Director of TM Capital:
"This transaction is an impressive step for Infosys. Many of the leading offshore services firms have talked about climbing up the value chain of services offerings and improving on-site customer presence, but none have completed a deal of such magnitude to back up their rhetoric. We expect the acquisition of Axon to mark the first of many acquisitions by the leading Indian offshore players of traditional on-site strategic and technology consulting companies in the US and Europe."
U.S. stock futures were mixed on Tuesday. Following Monday's broad sell-off and volatile session, which was also marked by low volume, today might not be different -- volatile and low volume. Several reports are in focus today, specifically some housing data that could shine more light on the sector, and consumer confidence, which could also move stocks. Meantime, oil prices declined and the dollar strengthened against major currencies.
Rio Tinto (NYSE: RTP) shares are down over 3% in premarket trading after the mining giant reported fiscal first-half profit more than doubled. RTP's acquisition of Alcan and soaring commodity prices helped Rio achieve the results. RTP shares have been declining due to worldwide slower growth.
Meanwhile, Anadarko Petroleum (NYSE: APC) shares were 2.4% higher in after-hours after it announced a plan to buy back up to $5 billion of stock.
Staying with share buybacks, Coach (NYSE: COH) are also 1.7% higher in premarket trading after announcing a buyback program of up to $1 billion, which follows the completion of a similar repurchase.
And of course, Lehman Brothers (NYSE: LEH). Shares of the embattled banker are rising this morning following speculation that Kohlberg Kravis Roberts may be interested in buying Neuberger Berman, according to CNBC, while Blackstone Group backed away.
Famed studio MGM, which is owned by a bunch of companies including Texas Pacific Group, Providence Equity Partner, Sony (NYSE: SNE) and Comcast (NYSE: CMCSA), is considering a public offering as it looks to deal with its $3.1 billion debt load. The company has hired Goldman Sachs (NYSE: GS) to explore options for a way out of the 2005 buyout that left the company over-leveraged.
Studios have slowed production because of the credit crunch that is making financing films harder than it's been in a long time.
Other possible alternatives include a bond offering or some other form of debt refinancing, but the company says it's not for sale, although it remains coy on that topic, saying that that "there is no 'asking price' for the company."
Is that a veiled invitation for bids? Sounds like it. But in this environment, there might not be many takers. Time Warner (NYSE: TWX) made an unsuccessful bid back in 2004, but most the other interested parties ended up walking away with various sized stakes in the company.
For financial markets, August is always a slow time as Wall Streeters head for their vacations. But this year, there was more than just seasonality. Simply put, it was a very tough month for M&A operators.
It's been about a year since the credit crunch started, and it looks like things aren't getting better. If anything, it's a good bet we'll continue to see volatility and layoffs in the financial services space.
In August, the M&A volume in the U.S. came to about $28.5 billion, which is 53% off from the same period a year ago.
Ironically, while private equity funds have a huge amount of capital to put to work, there is not much bank financing. As a result, most of the private equity deals have been fairly small (below $2 billion or so).
Also, some of the recent mega deals – such as InBev's $45 billion acquisition for Anheuser-Busch Cos. (NASDAQ: BUD) – are crowding out the financing market.
In other words, investment bankers may need to wait until next year for things to warm up again.
Precision Drilling (NYSE: PDS) announced the purchase of Grey Wolf (NYSE: GW) for $5.00 in cash and 0.1883 newly-issued Precision trust units for each GW share.
The transaction will establish PDS as one of the largest U.S. land drillers with a combined fleet of 371 drilling rigs.
PDS September option implied volatility of 46 is near its 26-week average of 43 according to Track Data, suggesting non-directional price movements.
GW overall option implied volatility of 45 is near its 26-week average, suggesting non-directional price movements.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Stock futures were mixed Monday morning, indicating stock would start on a down note a week full of economic data. This morning, investors are focusing on rising oil prices and existing home sales data to be released at 10:00 a.m. EDT. Also, over the weekend, Federal Reserve Chairman Bernanke commented from the Fed's yearly retreat, saying that problems in credit markets not yet over and are a threat to economy. Meanwhile, economists are saying inflation is catching up to the credit crisis as the major concern for the economy.
American International Group's (NYSE: AIG) credit ratings may be downgraded by Fitch due to uncertainties over AIG's exposure to mortgage backed securities. AIG was down 1.5% in after-hours Friday.
The Australian government approved Chinalco 14.99% stake in Rio Tinto's (NYSE: RTP) but warned the Chinese firm against buying more shares without prior approval. Alcoa (NYSE: AA) backed the purchase. RTP shares were up over 1% in Australian trading.
Broadcom Corp. (NASDAQ: BRCM) will pay around $192.8 million in cash to acquire chipmaker Advanced Micro Devices Inc.'s (NYSE: AMD) digital TV business, the companies announced Monday.
Minyanville Founder and CEO Todd Harrison dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
Holy cow, can it be any slower out there? I'm taking a break from trying to set the all-time record for meetings on a "slow" summah Friday to offer a quick take on a few topics.
There hasn't been any price talk on Lehman so even if it happens, it's a bit of a crap shoot. Remember Minyans, Bear Stearns was taken over too.
There is no doubt franchise value and a lot of smart people at Lehman. There's also a lot of baggage on their balance sheet. It -- like most of the financials -- is a double-edged sword.
Launched in 1992, private equity firm Madison Dearborn Partners, LLC ("MDP") has grown into a powerhouse. The firm invests in a wide array of industries such as communications, consumer, financial services, health care and so on.
However, MDP is now feeling the pressures from the credit crunch. In raising its next fund, investors have been fairly lukewarm. Instead, MDP is now planning to raise a mere $7.5 billion. The original goal was $10 billion.
Actually, when compared to the 1990s, this is still a pretty big fund and will generate juicy fees. What's more, MDP is likely to get some nice valuations on deals, which should benefit investors over the long haul.
Although, things are far from done. MDP has raised about $4 billion so far, and if the markets continue to be rocky, even the $7.5 billion target could be elusive.
Google's (NASDAQ: GOOG) success over the next decade depends, to some extent, on moving its search products from PCs to the new generation of mobile devices. It will go a long way toward getting a head start on that in a deal with Verizon (NYSE: VZ).
According toThe Wall Street Journal, "The deal under discussion, which would make Google the default search provider on Verizon devices and give it a share of ad revenue, is aimed at dramatically simplifying what is now a confusing set of search options for cellphone users."
The news is not good for Microsoft (NASDAQ: MSFT) or Yahoo! (NASDAQ: YHOO). After losing the PC search battle, their next, and perhaps last, option to pick up substantial business is on mobile handsets. Because Verizon has about 70 million subscribers in the U.S., a large opportunity to gain share from Google is gone.
Deals with cellular carriers are overrated. Even if the default search engine is on a handset, users can still access any other search company through the phone's web browser.
If PC habits carry over to the wireless world, Google has already won the new war. Few people are likely to change search preferences from device to device.
Douglas A. McIntyre is an editor at 247wallst.com.
Lehman Brothers Holdings Inc. (NYSE: LEH) stock is up over 10% as of 9:44 a.m. on reports that Korea Development Bank (KDB) is "open to" acquiring Lehman, according to Bloomberg News. Can you say short-covering?
Bloomberg reports that KDB said, "We are studying a number of options and are open to all possibilities, which could include (buying) Lehman." But this statement requires some context. Bloomberg reports that The Financial Times wrote yesterday that "Lehman failed to sell a 50 percent stake to [KDB] and China's Citic Securities Co. The buyers walked away after deciding Lehman demanded too high a price."
Meanwhile, this announcement must be scaring those who bet that Lehman would not be able to pay its bondholders. "Credit-default swaps protecting against a default on Lehman's bonds dropped 74 basis points today to 315," according to Bloomberg. Who knows where this latest chapter in the Lehman saga will lead?
Sheldon suggested the other day that Microsoft Corp. (NASDAQ: MSFT) should split off its web search and services arm so that it could fit better with a possible Yahoo, Inc. (NASDAQ: YHOO) combination. Instead of entertaining that notion, Microsoft still has some cash to spend to ensure, for now at least, it still has a growing presence in the web search and e-commerce arena.
U.S. stock futures were lower this morning on fear Tropical Storm Gustav's path may pose a threat to refinery activity along the Gulf of Mexico coastline and some would have to shut down. Indeed, 
Shares of 
Temasek Holdings is one of Singapore's sovereign wealth funds (SWFs), managing $130 billion. Over the past few years, the fund has been diversifying into emerging markets as well as developed economies. 
and 
. He also operates 
In India, the growth of the information technology (IT) industry has been stunning. For the most part, the strategy has been to focus on internal growth. However, this may be changing; that is, expect more M&A. 
U.S. stock futures were mixed on Tuesday. Following Monday's broad sell-off and volatile session, which was also marked by low volume, today might not be different -- volatile and low volume. Several reports are in focus today, specifically some housing data that could shine more light on the sector, and consumer confidence, which could also move stocks. Meantime, oil prices declined and the dollar strengthened against major currencies.
Famed studio MGM, which is owned by a bunch of companies including Texas Pacific Group, Providence Equity Partner, 
For financial markets, August is always a slow time as Wall Streeters head for their vacations. But this year, there was more than just seasonality. Simply put, it was a very tough month for M&A operators.
Precision Drilling
Minyanville Founder and CEO Todd Harrison dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit 
Launched in 1992, private equity firm 
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